Future Freight Flows NCHRP 20-83-01

Regional Transportation Advisory

Council

8 February 2012

What I’m talking about . . .

• What is NCHRP 20-83-1 – Future Freight Flows?

• Why scenario planning and what is it?

• What scenarios did we create?

• How did we use them?

• What have we learned so far?

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NCHRP 20-83(1) Project Objectives

• Two Objectives:

• “Provide decision makers [state DOTs] with a critical analysis of the driving forces behind high-impact economic changes and business sourcing patterns that may effect the US freight transportation system [in the year 2030 & beyond].”

• “Better enable informed discussions of national, multi-state, state, and regional freight policy and system investment priorities.”

• Three Key Deliverables:

• Develop a set of Future Freight Flow scenarios

• Validate scenarios and process in 6 workshops across the US

• Develop “Scenario Planning in a Box” for any DOT to use

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Different Methods for Planning

Time

Material adapted from Dr. Mahender Singh SC2020

4

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But what about very long term (10+ years) planning?

Longer term planning is impacted by events

Source: Scenarios: An Explorer’s Guide, Shell International 2003.

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Poor Forecasting is not a thing of the past . . .

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2

2.25

2.5

2.75

3

3.25

3.5

3.75

4

4.25

4.5

4.75

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13

OnHighwayDieselFuel($/gallo

n)

Forecast_Jan2008 Forecast_Jan2009 Forecast_Jan2010 Forecast_Jan2011 Forecast_Apr2011 Actual

Different Methods for Planning

Time

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Shift focus from prediction to preparation

But what about very long term (10+ years) planning?

Material adapted from Dr. Mahender Singh SC2020

So many potential futures, so little time . . .

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Preferred vs. Probable vs. Plausible

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Now

Possible Futures

Preferred Future - VISION

Because we can’t explore ALL possible futures, we must create a handful of plausible, alternative futures that together contain the most relevant uncertainty dimensions

Probable Future - PREDICTION

Scenario Planning

• Criteria for a good set of scenarios

• Decision Making– capture right decision

• Plausibility – within realistic limits

• Alternatives – no favorites or preferred (Unofficial/Official)

• Consistency – internal logic is aligned

• Differentiation – structurally different

• Memorability – easy to recall after event (name helps)

• Challenge – push against established wisdom

• Accuracy of event forecasting is not important

• The skill we are developing is preparation not predicting

• The focus is on effects not on individual events

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Effects versus Events

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14 April 2010 Eruption of the Eyjafjallajökull Volcano

Summer 2008 Manufacturing moratorium in Beijing

Translating Events into Effects Freight Flow Patterns

How can an event impact freight flows?

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Impact on flow destination

Impact on sourcing patterns

Impact on routing

Impact on flow volume

Impact on value density $

Where are raw products and WIP sourced from? Are materials sourced in or out of the region?

Where is the demand located? How are final destination locations distributed?

How is freight moved within the region? Are there intermediate shipment points or mode switches?

How will the total volume of freight shipped in and through the region change?

How will the product characteristics change? How does the value density change?

The Real Value of Scenario Planning

• Forecasting Challenges • Without step changes, forecasting would be easy!

• Step changes are driven by events, and . . .

• Events are next to impossible to predict, but . . .

• Planners do a pretty good job preparing, so . . .

• Scenario planning allows us to shift from

Predicting future Events

To

Preparing for potential Effects

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Classic Cases of Short Sightedness

Great Horse Manure Crisis of 1894

• More than 150,000 horses in NYC producing over 2,000 tons of manure per day

• Estimates of manure reaching 3rd floors by 1930 & nine feet in London by 1950

• 1st International Urban Planning Conference held in NYC in 1894

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Interestingly, over 4000 cars were sold in the US in 1900. By, 1916 more cars than horses were registered in NYC

Classic Cases of Short Sightedness

The Quartz Crisis/Revolution • Swiss watchmaking industry dominated the

global market after WWII

• In 1960, they held over 50% market share

• New quartz technology was introduced in the late 1960’s- Swiss firms ignored

• By 1970’s, US & Japan firms dominated and Swiss firms had less than 10% of market

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Interestingly, the Quartz technology was first developed by Max Hetzel, a Swiss engineer!

Future Freight Flow Scenarios

We created 4 FFF scenarios for November 2, 2037

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Differences Between Scenarios

Global Trade Low High High Low (physical)

Resource Availability Low Low High High

Energy Cost Level High High Low Low

Energy Cost Variability Low High High Low

Level of Environmental Awareness

Same as Today High Low High

Population Dispersion Growth in SW Growth in

Biggest Cities Growth in

Biggest Cities Rise in Mid

Tiered Cities

Energy Sources Majority NA Mix Foreign &

Domestic Majority Foreign

Majority Domestic

Level of Migration High w/in Bloc, Low

between High High Low

Migration Policy High High Low Low

Currency Fluctuations Low w/in Bloc High Moderate Low

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Italics: indirect effect

So, what do we do with the scenarios?

• Use them in workshops • Invite a diverse set of stakeholders

• Private Sector: shippers, carriers, 3PLs

• Public Sector: from Federal, state, & local levels

• Have them consider a set of strategic options or alternatives • Set of potential investments

• Potential freight corridors

• Open-ended set of themes to prioritize

• Validated in 6 workshops held across country • Delaware Valley Regional Planning Commission

• Minnesota DOT

• Washington State DOT

• Port of Long Beach

• Georgia DOT

• Washington DC

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FFF Workshop Structure

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Introduction & Overview (ALL)

Global Marketplace

Naftastique!

Millions Of Markets

One World Order

Feedback &/or Evaluation

Feedback &/or Evaluation

Feedback &/or Evaluation

Feedback &/or Evaluation

Debrief (ALL)

•No Brainers •No Gainers •No Regrets •Contingencies

Scenario Immersion

Evaluation Mechanism

Convergence & Reconciliation

Segments Segments Segments Segments

Sample X-Scenario Analysis

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Sample X-Scenario Analysis

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Initial Learnings

• Process & Method • Attendee selection is key – group dynamic dictates discussion level

• Group facilitation is the most critical skill

• Positive/Negative voting mechanisms work

• Immersion works with portfolio of collateral – videos especially

• Debrief in same day is difficult – and not totally worthwhile

• Insights & Outcomes • System connections (intermodal) were always robust

• Flexible use of existing facilities frequently robust

• Robust perceptions of the four scenarios

• Global Marketplace – viewed as most like today and most probable to occur

• One World Order & Naftastique! as “evolutionary”

• Millions of Markets – revolutionary and most drastic future

• Challenges to Overcome • How can we enable DOTs to conduct these workshops by themselves?

• How can scenario planning be incorporated into existing processes?

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Future Freight Flows NCHRP 20-83-01

8 February 2012

Boston, MA

Dr. Chris Caplice

Executive Director, MIT CTL